Currency Update - Thursday 27th February 2020

AUD

The ongoing Covid-19 outbreak has reached a pivotal point with the spread of
the virus now accelerating outside of China faster than within China. Risk took
another hit with choppy conditions for equities and other risky assets like the
Australian Dollar. The virus continues to spread around the Middle-East,
through Europe and now Brazil is confirming its first case in Latin America.
There are more confirmed deaths in Iran and Italy while South Korea confirmed
it’s 11th death since the outbreak began. With markets reeling from the
perceived economic fallout from the virus the latest news only serves to
reinforce investor decisions to trim their risk positions. With no help coming
from a poor Construction Work reading yesterday (-3%, failing to meet expectations
of -1%) the Australian Dollar may need to look towards the Private Capital
Expenditure released this morning for help. However, with the news so utterly
dominated by the outbreak, we can no longer rely on good data reading to give
the AUD a surge. The reality is that the Australian Dollar may have a way to go
down before things get better.

USD

The Australian Dollar is carving up fresh lows following the latest Covid-19
outbreaks around the world. AUD/USD was doggedly holding onto the 0.6580
support however now that the virus is accelerating its spread outside of China
the levy has finally burst now the pair is being traded at fresh 11 year lows
of 0.6545 at time of writing. The USD remains well supported across the board
as risk positions are exited and investors pile into safe havens. On the data
front, New home sales in the US increased by 7.9% in January, beating the
forecast of a 3.5% increase. The negative sentiment stemming from the
Coronavirus continues to outweigh any positive data with equities and risk
assets remaining under pressure. Looking ahead we have ample US data overnight
with Durable Goods data in addition to Prelim GDP and finally additional Home
Sales data all out early tomorrow morning.

EUR

The AUD continues to sink against the Euro as heavy selling once again slams
risk assets. The Australian Dollar is holding on just above the 0.60 handles
after markets took a more favorable posture towards the Eurozone as Germany
announces plans to provide a round of stimulus to their ailing economy. The
German Finance Minister Olaf Scholz is considering a move that could
temporarily suspend the constitutional mechanisms that restrict the country’s
debt levels to provide relief for indebted regions. No other data to report.

GBP

Pound Sterling has seemingly paused the recent run against the Aussie Dollar
after Brexit fears have been whipped up again amid the international chaos. The
AUD is holding on around 0.5072 on another day of sideways movement for
AUD/GBP. EU’s Barnier was quoted as saying it will be difficult to get a deal
with the UK with Johnson adamant that there won’t be an extension. No other
data to report.

NZD

The Australian Dollar opens lower this morning after the NZD put together a
strong rally starting yesterday afternoon and running all through the night.
Markets trade the pair at 1.0404 at the time of writing and ahead this morning
we have the important ANZ Business Confidence survey coming out of New Zealand.
No other data to report.